10 things I wish I knew about money when I started my first job

Hannah CoombesPosted 2 September 2015

It's Money Week so we've republished this still very relevant look at personal finances origninally posted on REDnews in August 2014.

When you’re young, carefree and just starting to see the cash roll in from your first ‘proper’ job, it’s not surprising the last thing you want to be thinking about is saving. But when staring down the barrel of a huge mortgage and never-ending bills in your 30s and 40s, many of us wish we’d done just that.

Thirty- something Hannah Coombes, a senior leader in Westpac’s Consumer Banking team, shares what she wishes she knew about finances when starting her first job.

1) Stick to the 50/30/20 rule

This is an extremely handy ratio to remember – spend 50% of your income on your needs and essentials, 30% on your ‘wants’ and put 20% away for a rainy day.

If 20% seems too tough, even just aiming to save 10% will make a big difference. There are plenty of ways to do this, the trick is finding the right model for you.

2) Budgets don’t have to be boring

You don’t have to calculate a budget in minute detail and have absolutely everything factored into it. It’s more about knowing what your fixed costs are and being aware of what you’re spending.

Knowledge is power and even something as simple as keeping a list of purchases in your smartphone can give you a clearer understanding of what portion of your income can be spent on the ‘wants’, and where you can make cut-backs.

3) You’re never too young to start saving for your retirement

When you’re 18, retirement can seem like a long time away. Turning 21 can seem like an age. But time passes quickly and the reality is there’s never going to be an ideal time to start saving – you can’t start yesterday.

When you first start working, chances are you’re going to have more disposable income than any other time in your life, so it’s the best time to start putting the pennies away. New Zealanders are lucky to have KiwiSaver as a nice place to start.

4) Think about KiwiSaver as an option to buy your first home

One of the good things about KiwiSaver is that if you’re a first time homebuyer, you can apply to withdraw the contributions that you and your employer have made to put towards the purchase of your first home.

You only have to have been in KiwiSaver for three years before you can apply for the first home buyer withdrawal.

5) Understand the cost of debt

As well as the purchase price, factor in what it’s going to cost you in the long run considering things like establishment fees and interest.

Avoid loans from third tier lenders which can cost a fortune in interest. Avoid making purchases on a credit card if there’s another option.

With interest free offers, make sure you’ll be able to pay it off during that period. Store cards can be a trap – some with interest as high as 20% or more.

6) Only get a credit card with a limit that you’re able to repay in full

It sounds like a no-brainer, but if you’re earning $1000 a fortnight, don’t take out a credit card with a $4,000 limit. To avoid high interest costs you should be paying off your credit card in full each month and the only way that’s going to happen is if it’s within your earning potential.

7) Like Mum said: if you can’t afford it, don’t buy it

If you don’t have the money to buy those shoes or go to that gig, don’t do it. Living within your means is the easiest way to stay out of debt.

You can make it easier on yourself by withdrawing some cash and leaving your credit card at home when you go shopping or have a night out. Your credit card should only really be there for bigger purchases or emergencies.

8) Always pay your bills on time

Just because the phone company isn’t threatening to cut off your phone line, it doesn’t mean that you’re not incurring late payment fees.

Some companies offer prompt payment discounts for paying on time, which is a great way to save money.

It’s also really important to keep track of what bills are in your name, particularly if you’re flatting. If you move flats and the account is still in your name you’ll be ultimately responsible for any unpaid bills. It can also contribute to getting a bad credit rating which can make it harder to borrow in the future.

9) A man is not a financial plan

If there’s one thing I’ve learnt it’s that you never know what life has in store for you.

You shouldn’t rely on a future partner having enough money for things like a house deposit or retirement savings. Sometimes you can be fooled into thinking that somehow things are just going to magically work out financially.

10) Download your bank’s mobile banking app

Get across what your bank offers in terms of mobile banking. Our smartphones are always with us so mobile apps are an excellent way to keep track of your money, whether you’re in line at the supermarket or at home on the couch.

The opinions expressed on this page are not necessarily those of Westpac and Westpac does not endorse or approve any goods or services to which reference is made. Westpac makes no representation as to the accuracy or currency of the materials, which are intended as a general guide only, without taking your personal financial situation or goals into account. Westpac accepts no responsibility for the availability or content of any third party websites to which this page may link.

10 things I wish I knew about money when I started my first job

Hannah CoombesPosted 2 September 2015

It's Money Week so we've republished this still very relevant look at personal finances origninally posted on REDnews in August 2014.

When you’re young, carefree and just starting to see the cash roll in from your first ‘proper’ job, it’s not surprising the last thing you want to be thinking about is saving. But when staring down the barrel of a huge mortgage and never-ending bills in your 30s and 40s, many of us wish we’d done just that.

Thirty- something Hannah Coombes, a senior leader in Westpac’s Consumer Banking team, shares what she wishes she knew about finances when starting her first job.

1) Stick to the 50/30/20 rule

This is an extremely handy ratio to remember – spend 50% of your income on your needs and essentials, 30% on your ‘wants’ and put 20% away for a rainy day.

If 20% seems too tough, even just aiming to save 10% will make a big difference. There are plenty of ways to do this, the trick is finding the right model for you.

2) Budgets don’t have to be boring

You don’t have to calculate a budget in minute detail and have absolutely everything factored into it. It’s more about knowing what your fixed costs are and being aware of what you’re spending.

Knowledge is power and even something as simple as keeping a list of purchases in your smartphone can give you a clearer understanding of what portion of your income can be spent on the ‘wants’, and where you can make cut-backs.

3) You’re never too young to start saving for your retirement

When you’re 18, retirement can seem like a long time away. Turning 21 can seem like an age. But time passes quickly and the reality is there’s never going to be an ideal time to start saving – you can’t start yesterday.

When you first start working, chances are you’re going to have more disposable income than any other time in your life, so it’s the best time to start putting the pennies away. New Zealanders are lucky to have KiwiSaver as a nice place to start.

4) Think about KiwiSaver as an option to buy your first home

One of the good things about KiwiSaver is that if you’re a first time homebuyer, you can apply to withdraw the contributions that you and your employer have made to put towards the purchase of your first home.

You only have to have been in KiwiSaver for three years before you can apply for the first home buyer withdrawal.

5) Understand the cost of debt

As well as the purchase price, factor in what it’s going to cost you in the long run considering things like establishment fees and interest.

Avoid loans from third tier lenders which can cost a fortune in interest. Avoid making purchases on a credit card if there’s another option.

With interest free offers, make sure you’ll be able to pay it off during that period. Store cards can be a trap – some with interest as high as 20% or more.

6) Only get a credit card with a limit that you’re able to repay in full

It sounds like a no-brainer, but if you’re earning $1000 a fortnight, don’t take out a credit card with a $4,000 limit. To avoid high interest costs you should be paying off your credit card in full each month and the only way that’s going to happen is if it’s within your earning potential.

7) Like Mum said: if you can’t afford it, don’t buy it

If you don’t have the money to buy those shoes or go to that gig, don’t do it. Living within your means is the easiest way to stay out of debt.

You can make it easier on yourself by withdrawing some cash and leaving your credit card at home when you go shopping or have a night out. Your credit card should only really be there for bigger purchases or emergencies.

8) Always pay your bills on time

Just because the phone company isn’t threatening to cut off your phone line, it doesn’t mean that you’re not incurring late payment fees.

Some companies offer prompt payment discounts for paying on time, which is a great way to save money.

It’s also really important to keep track of what bills are in your name, particularly if you’re flatting. If you move flats and the account is still in your name you’ll be ultimately responsible for any unpaid bills. It can also contribute to getting a bad credit rating which can make it harder to borrow in the future.

9) A man is not a financial plan

If there’s one thing I’ve learnt it’s that you never know what life has in store for you.

You shouldn’t rely on a future partner having enough money for things like a house deposit or retirement savings. Sometimes you can be fooled into thinking that somehow things are just going to magically work out financially.

10) Download your bank’s mobile banking app

Get across what your bank offers in terms of mobile banking. Our smartphones are always with us so mobile apps are an excellent way to keep track of your money, whether you’re in line at the supermarket or at home on the couch.

The opinions expressed on this page are not necessarily those of Westpac and Westpac does not endorse or approve any goods or services to which reference is made. Westpac makes no representation as to the accuracy or currency of the materials, which are intended as a general guide only, without taking your personal financial situation or goals into account. Westpac accepts no responsibility for the availability or content of any third party websites to which this page may link.